U.S. agencies back revoking ability of China Telecom to operate in U.S.

WASHINGTON (Reuters) - The U.S. Justice Department and other federal agencies on Thursday called on the Federal Communications Commission (FCC) to revoke China Telecom (Americas) Corp’s (0728.HK) authorization to provide international telecommunications services to and from the United States.

China Telecom is the U.S. subsidiary of a People’s Republic of China (PRC) state-owned telecommunications company. Last year, two U.S. senators asked the FCC to review approvals of China Telecom and China Unicom (0762.HK) to operate in the United States.

The FCC last May voted unanimously to deny another state-owned Chinese telecommunications company, China Mobile Ltd (0941.HK), the right to provide services in the United States, citing risks that the Chinese government could use the approval to conduct espionage against the U.S. government, It said then that it was “looking” at the licenses of China Telecom and China Unicom.

China Telecom (Americas) rejected the allegations and said it has “been extremely cooperative and transparent with regulators.”

“In many instances, we have gone beyond what has been requested to demonstrate how our business operates and serves our customers following the highest international standards,” the company said in a statement. “We look forward to sharing additional details to support our position and addressing any concerns.”

China’s foreign ministry said on Friday that Beijing is “firmly opposed” to any action by the United States against China Telecom.

“We urge the United States to respect market economy principles, to cease its mistaken practices of generalizing national security and politicizing economic issues, and to cease unjustifiable oppression of Chinese companies,” Foreign ministry spokesman Zhao Lijian told reporters during a daily briefing.

China’s telecommunications networks and companies have come under heightened scrutiny by U.S. agencies. An FCC spokeswoman said the agency “has been looking at this issue. We welcome the input of the executive branch agencies and will review it carefully.”

The agencies, including Homeland Security, Defense, State, Commerce, and the United States Trade Representative, cited “substantial and unacceptable national security and law enforcement risks associated with China Telecom’s operations.”

Those included concerns that China Telecom could be controlled or influenced by China’s government. The agencies also said China Telecom’s U.S. operations might allow Chinese government entities “to engage in malicious cyber activity enabling economic espionage and disruption and misrouting of U.S. communications.”

In September, U.S. Senate Democratic Leader Charles Schumer and Senator Tom Cotton, a Republican, raised concerns that China Telecom and China Unicom “have access to our telephone lines, fiber optic cables, cellular networks and satellites in ways that could give it (China) the ability to target the content of communications of Americans or their businesses and the U.S. government.”

FILE PHOTO: A sign of 5G is pictured at the booth of China Telecom during an internet expo at the fifth World Internet Conference (WIC) in Wuzhen, Zhejiang province, China, November 7, 2018. REUTERS/Jason Lee

On Wednesday, the FCC agreed to allow Alphabet Inc unit Google (GOOGL.O) to use part of an U.S.-Asia undersea telecommunications cable.

Google agreed to operate only a portion of the 8,000-mile Pacific Light Cable Network System between the United States and Taiwan, but not Hong Kong. Google and Facebook Inc (FB.O) helped pay for construction of the now completed telecommunications link but U.S. regulators have blocked its use.

On Wednesday, the Justice Department said U.S. agencies believe “there is a significant risk that the grant of a direct cable connection between the United States and Hong Kong would seriously jeopardize the national security and law enforcement interests of the United States.”

Reporting by David Shepardson; Editing by Leslie Adler and David Gregorio